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Added Value

Added Value. AS Business Studies. Aims and Objectives. Aim: Understand Added Value Objectives: Define Added Value Calculate added value Analyse methods of adding value Evaluate the factors needed to maintain a USP. Starter. What do you think added value means?. Added Value.

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Added Value

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  1. Added Value AS Business Studies

  2. Aims and Objectives Aim: • Understand Added Value Objectives: • Define Added Value • Calculate added value • Analyse methods of adding value • Evaluate the factors needed to maintain a USP

  3. Starter • What do you think added value means?

  4. Added Value Added Value = the difference between the price of the finished product/service and the cost of the inputs involved in making it.

  5. Added Value Example • Sales Revenue • 1,000 units sold for £20 each = £20,000 revenue • Costs • To make 1,000 units • Raw Materials - £7,500 • Labour - £5,000 • Other production costs - £2,500 • Total Costs = £15,000 • Added Value • £20,000 less £15,000 = £5,000 Added Value

  6. Calculate Added Value For 2000 Units • Sales Revenue • 2,000 units sold for £30 each • Costs • To make 1,000 units • Raw Materials - £8,000 • Labour - £5,000 • Other production costs - £4,000 • Added Value

  7. Added Value Example • Good quality potatoes make great potato chips or crisps. But what do you with the smaller or mis-shapen potatoes which fail the raw material quality test for a premium crisp brand? Simple, you use them to create a premium brand of vodka… • http://www.tutor2u.net/blog/index.php/business-studies/comments/adding-value-turning-waste-into-gold

  8. Ways of Adding Value • What methods can you think of to add value? • In other words, what would allow you to charge a high price and cut costs to increase added value?

  9. Ways of Adding Value

  10. Unique Selling Points (USP) • A characteristic of a product that makes it different from other similar products being sold in the market such as design, quality or image. • One of the best ways to add value! • How many product’s USPs can you think of?

  11. The Importance of a USP • What may be the benefits of having a USP?

  12. USP Evaluation • Reaction of competitors • Demand being maintained over time • Advertising and publicity of USP What does the maintaining of a USP depend on?

  13. Benefits of Adding Value • What may be the benefits of having a USP? • Charge a higher price • Create a point of difference with competitors • Focuses business on its target market segment

  14. Signs That a Small Business Is Adding Value • Strong gross profit margins • Gross profit/Sales • A strong signal • Repeat Business • Sign of satisfied customers • Suggests customers feel they are getting value for money • Good brand or name recognition • Important for word of mouth recommendation

  15. Plenary Quiz • Define added value. • What is the formula for calculating added value. • Explain three methods of adding value. • Define a USP. • What does the maintenance of a USP depend on? • Give two signals that a small business is adding value.

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